The court determined that compensation from compulsory land acquisition is not taxable under the Income Tax Act, as stipulated in the federal constitution, declaring the relevant provision unconstitutional.

(Lampiran 1)

Introduction

[1] The applicant applied for Judicial Review to quash the decision of the Ketua Pengarah Hasil Dalam Negeri (DGIR), alleging it was illegal, void, beyond authority, breached natural justice, was irrational or unreasonable, denied the applicant's legitimate expectation, and sought further relief as stated in the application at L1.

[2] The applicant was granted leave to apply for Judicial Review (JR) under O 53 r 3 of the Rules of Court 2012 (RC 2012) on 13 September 2023:

[3] For ease of reference, I reproduced the said application (L1):

"(1) THAT the applicant be granted leave of this Honourable Court to apply for:

(a) An Order of Certiorari to quash the respondent's decision, which is deemed to have been made on 7 March 2023 and communicated to the applicant on the same date on the grounds that the said Decision was illegal, void, unlawful and/or in excess of authority, made in breach of principles of natural justice, had been irrational and/or unreasonable, and resulted in a denial of the applicant's legitimate expectations;

(b) A Mandamus Order for the respondent to recognise and give effect to the decision of the Federal Court dated 9 December 2022 in the case of Wiramuda (M) Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri 2023 MarsdenLR 702; ; (Civil Appeal No 01(f)-38-08/2022(W)) ("the Wiramuda Decision"), which has held, amongst others, that s 4C of the Income Tax Act 1967 (" ITA ") is unconstitutional as it contravenes art 13(2) of the Federal Constitution;

(c) A Mandamus Order for the respondent to recognise and give effect to the legal position that, following the Wiramuda Decision, the compensations received by the applicant for the compulsory acquisition of its following parcel of land ("Land") by the Selangor State Authority in the year of assessment ("YA") 2017 are not to be taxed under s 4C of the ITA and hence, not subject to income tax:

(d) A Mandamus Order for the respondent to allow the applicant to submit revised tax computations for the YA 2017 on the basis that the compensations received by the applicant on the Land are not income under the ITA , and to accept and give effect to the revised tax computations accordingly.

(e) A Mandamus Order that the respondent shall refund the sums of taxes paid by the applicant on the compensation received for the compulsory acquisition of the Land following the Wiramuda Decision, together with interest accruing at the rate of 8% per annum on the said sum (calculated from the day on which the applicant has made payment of such taxes to the Respondent until the date the taxes are fully refunded to the applicant by the respondent).

(f) A Declaration that the respondent is bound by and shall give effect to the decision of the Federal Court in the Wiramuda Decision that, amongst others, s 4C of the Income Tax Act 1967 is unconstitutional as it contravenes art 13(2) of the Federal Constitution .

(g) A Declaration that following the Wiramuda Decision, the compensations received by the applicant for the compulsory acquisitions of its Land by the Selangor State Authority in the YA 2017 are not to be taxed under s 4C of the ITA and hence, not subject to income tax.

(2) THAT all necessary and consequential directions and orders be given;

(3) THAT the costs of this application be costs in the cause; and

(4) ALL other and further relief which this Honourable Court deems fit and proper."

[4] On 29 July 2025:

(1) After examining and considering all the cause papers, and the respective written submissions of the parties, I find that L1 has merit and order in terms was granted for prayer a, b, c, d, e (with variation, a 5% interest is allowed on the returned sum commencing from the date of the filing of this JR), prayer f and g.

(2) Parties were o